Question

Select the most appropriate alternative from the alternatives given below and rewrite the statement.

Cash purchases of goods should be credited to ______.
a) Purchase A/c
b) Sales A/c
c) Cash A/c
d) Goods A/c

Answer 1

Cash purchases of goods should be credited to Cash A/c.

Explanation:
A cash account is classified as a real account. The rule for recording transactions of a real account is to debit what comes in and to credit what goes out. Cash purchases of goods will lead to an outflow of cash, i.e. cash is going out. Hence, the cash account is credited and the purchases account is debited. The sales account is credited only when goods are sold.